Seed investing is not making anyone a billionaire in India anytime soon: angel investor Anupam Mittal

Anupam Mittal, 40, is the Founder and CEO of People Group, which owns businesses such as Shaadi.com, Makaan.com, Mauj Mobile and People Pictures. He spoke to Business Today's Taslima Khan on his investments in start-ups, what motivates him and his investment style.

Q. How did you start investing in start-ups?

A. I started angel investing when I did not know it was called angel investing, back in 2007. I invested in a company called Interactive Avenues. All I knew was that the team was bright. I sat with them at the airport, negotiated the terms and gave out the cheque. When Interactive Avenues sold off about a year back, I was the single largest shareholder in the company. It was the first exit for me as well. Right after that there were smaller exits as well with start-ups such as LittleEyelabs and an online business events company.

Q. What is your start-up portfolio now?

A. Now it is about 45-odd companies. The companies range from service marketplaces to private label ecommerce companies in lingerie (Pretty Secrets), and enterprise software. Most of my companies are internet-related because that is where value creation is disproportionate, as compared to other sectors. My typical ticket size is about Rs 5 lakh and highest is about Rs 4 crore, which can go in multiple rounds (Interactive Avenues). On an average, I would invest Rs 25-50 lakh per company.

Q. How has your RoI (return on investment) been?

A. I have had a very good RoI so far. I have been very lucky. No other industry gives this kind of return, as long as you know what you are doing. I am very, very happy. It's trickier than the stock market, because there is no liquidity. Without that understanding it can be very dangerous. Other than start-ups, I look at real estate...that helps balance each other out at least in theory. Both give disproportionate returns.

I have had five write offs. It would not be fair to disclose them. About five, six or even seven in the portfolio are worth more than 100 times the investment…Pretty Secrets, Sapience Analytics, Ola Cabs. Another four or five have raised Series A or Series B. Another 10 to 15 have potential but still to see what happens with them.

There is no proven template to success but I am the kind of guy who wants to stay on with the investment. It's a judgement call in terms of growth prospects. Ideally I don't want to risk more than Rs 50 lakh to a crore in one company. We differ from institutional investors in the sense we can't have too much money in a single company, beyond a certain bandwidth. But there can be certain exceptions. Angel investors can own anything between 15 and 30 per cent stake in companies. Series B onwards, they tend to get diluted when later investors get involved in the regular management of the company.

I am also an LP (Limited Partner) in a couple of Indian VCs (venture capital firms) - Orios Ventures, GSF and Kae Capital. I also participate in their investments. I am also part of IAN (Indian Angel Network) and Mumbai Angels. Half of my investments are through these networks and the other half are direct. Group investments are smaller bets but a lot of times you meet start-ups very early in the game; it doesn't make sense for them to go to angel networks. Often start-ups don't want to go to handle too many people at the network. I do smaller investments through networks, and larger investments directly.

Q. Do write-offs bother you?

A. Write-offs don't bother me at all, not much. Ask someone who has lost a lot of money. I've been lucky. There is nothing like a formula to find the right companies. There is some level of created luck when you look at opportunities quickly and make decisions quickly.

Q. Did you ever consider raising a fund?

A. I don't think I will ever set up a fund. It requires a different set of talent to raise capital from LPs. I do angel investing because I stumbled upon it. Also to learn a lot. Also because I am an entrepreneur and in our business one can become obsolete very fast. We have to know what's happening around. When you raise capital it becomes more of a fund manager's role managing other people's money. Then you are not entrepreneur spotting. Then you have a defined money returning strategy.

Q. Can one become a billionaire with start-ups in India?

A. Well, you have to be very, very lucky. One has to change the model. If you simply do angel investing then it's very hard. You either invest a lot of money in a few companies or you invest little-little capital in a number of companies, when your failure rate rises very high but you will end up averaging out. You have to have lots of capital and you have to be willing to invest in multiple rounds, not just seed round. If you are trying to make a billion dollars you have to deploy 100 million dollars. In India we have not seen a Facebook wherein early investors - the founders of Naspers - became billionaires. Seed investing is not going to make anybody a billionaire anytime soon here.

In the last couple of months, I have invested in four or five companies. I have realised I need to review my portfolio and have a refined strategy. One thing for sure is that we will keep investing a lot of money.